By: SunnyHill Financial
As you start exploring different mortgage options the term “amortization” will be brought up quite a bit. Not to worry. We are here to breakdown amortization and how it impacts your mortgage.
What is Amortization?
Amortization is making a fixed payment over time, with a portion of your payment going towards the loan principal and the other remaining portion towards interest, based upon a predetermined schedule.
Once you start making payments on your mortgage, our amortization schedule will help you determine how much of your monthly mortgage payment is spent towards principle and how much towards interest. We have a tool to help take the guessing out of these payments. Our amortization schedule will show you in detail how each payment on an amortizing loan will be repaid.
The Mortgage Amortization Schedule
The amortization schedule will help you determine how much of your mortgage payment is being allocated. The amortization schedule is a chart showing the fluctuating amounts paid towards your principal and interest and how your loan balance is gradually declining. To use the calculator, you will need the loan amount, interest rate, terms in years and start date.
The amortization schedule calculator will then determine the breakdown of principal and interest:
- How much interest and principal is paid in a given month
- How much is paid in any given month or year in the future
- How much is still owed in the future on the mortgage
- How you can shorten the life of your mortgage by paying an additional amount towards the principal.
Understanding the Mortgage Amortization Schedule
At the start of your loan the majority of the payment goes towards interest with less being put toward the mortgage principal balance. The schedule shows as the term of your loan progresses a larger portion of your payment will be paid towards the principal and less towards interest at the end of your term.
If you are able, one way to decrease the term of your loan is to make extra payments on your mortgage. Payments should be made toward your principal balance to pay down the mortgage balance quicker, resulting in less interest that needs to be paid. Allowing you to pay off your loan quicker.
It is always important to consult with your mortgage lender before deciding to make payments early. Some loans may have a prepayment penalty which can result in an additional charge.
How this helps you
Now that you have learned what amortization is, how it is calculated, how it can help you, it opens your eyes to your mortgage and how your payments are calculated. The amortization table calculator helps you understand your options as you make payments. Making you a much savvier mortgage shopper. By developing a plan, you are able to pay off your mortgage sooner, putting more money in your pocket.